13 Things to Teach Your Kids About Credit Cards

Whether your kids are 5 or 15, you should to start teaching them about credit cards now, before they start being inundated with credit card offers. (Some parents report their 4-year-olds receiving offers in the mail!) It is much better for your children to learn about credit cards from you than to make a mistake when handling their cards and learn the hard way. Below are 13 things to teach your kids about credit cards.

What Young Kids Need to Know About Credit Cards

Depending on the age of your children, they may not be ready for a fully loaded lecture about credit cards. But that doesn’t mean you should ignore the topic completely. Here are three things even young children should be taught about credit cards. I’ve written these as things you can say directly to your children.

Credit Cards Are Not Toys

A credit card is not something that you should play with. While they aren’t fragile like glass, they can be broken if bent. More importantly, because of the size of a credit card, it can be easily lost. If you are playing with mommy’s credit card, you might leave it somewhere she can’t find it. Then she will be very upset and have to look a long time for it. Or she might think it is stolen and have to cancel her card, which will make her even more upset. The best thing to do is to leave mommy’s credit cards in her wallet where she keeps them.

Credit Cards Are Not Magical

When mommy uses her credit card to pay for something, it is just like real money. When you take dollars and coins from your piggy bank to buy a model airplane, you don’t get that money back. You have to trade your dollars and get the airplane in return. When mommy uses her credit card, it is just like she is taking dollars from her piggy bank. [Yes, this is slightly simplified and should be clarified as a child gets older, but it gets the basic point across.]

Credit Cards Are Private

Every person has his or her own credit card. Mommy doesn’t give her credit card to her friend Susan to use. And she is very careful about who she tells her credit card number to—on the phone or on the internet. It is important that you don’t ever tell anyone the numbers on mommy’s card, type the numbers into a form on the internet, or give her card to someone else to use.

What to Teach Your Kids about Credit Cards When They Are Older

If your kids are a little older—certainly by the time they are teenagers—you need to begin educating them about the ins and outs of credit cards. Here are ten more things to tell them.

Understand That Your Credit Limit Is Not a Suggested Target

Don’t spend up to your credit limit. It’s a bad idea for a number of reasons, including the fact that you likely won’t be able to pay it off. And if you can’t pay it off, you’ll spend tons of money on interest. Worse, if you can’t make a payment at all your credit card company can report you to a collections agency or charge you outrageous fees.

Don’t Accept Every Offer You Get

Credit card companies will start sending you offers before you’re 18. Don’t ever fill out one of these offers without talking to me first. When the time is right, we can discuss when you should be able to get and use your own credit card. When you are 18, don’t apply for every card offer you get.

Keep Track of Your Credit Cards

Once you do have a credit card, keep track of it. If you needlessly sign up for multiple cards and then forget about one, it could result in someone stealing your information. If you’ve forgotten about the card altogether, you wouldn’t necessarily know.

Pay Them Off in Full Every Month

It’s best to pay off your credit cards on a monthly basis. Interest adds up quickly.

Watch Your Interest Rate—It Can Change

Credit card companies will get you in the door with too-good-to-be-true low interest rates. These rates don’t last, so read your offers carefully and keep a close eye on your interest rate month-to-month.

Always Read the Fine Print

There’s a lot of it on credit card offers, but it’s essential to be aware of what you’re signing up for. Credit card companies count on you reading the “0% APR!” and skip the fine print about the APR jumping to 28% in 18 months.

Know That Identity Theft Is A Real Problem

The FTCestimates that at least nine million Americans are victims of identity theft each year. If you have a credit card, it’s even easier for identity thieves to steal your identity. Make sure you take steps to protect yourself, including making careful decisions about who you give your credit card number to and getting your credit report at least annually.

Be Careful When and Where You Use Your Cards

Be savvy with your credit cards, especially when you’re shopping online. Only use secure payment sites - these are sites whose addresses start with “https” - and use your best judgment. If a something doesn’t seem right, it probably isn’t.

Get Your Credit Report at Least Annually

You can get a free credit report every year, so take advantage of it. The information in your credit report is used to determine your eligibility for everything from employment and insurance to car loans and credit. Make sure everything is accurate; if it’s not, find out why and dispute the errors. To get your free credit report at the official government sanctioned website visit Annual Credit Report.

You Don’t Need to Have Money In Your Bank Account to Use Your Card—But You Should

Unlike with a debit or charge card, you don’t need to have the money in your account to spend it with a credit card. This means you can spend well beyond your means and still not reach your credit limit. But that doesn’t mean you should. It’s easy to get carried away with credit card spending and rack up a ton of debt without meaning to. Be careful and spend responsibly.

With all of the risks of credit cards, should you still tell your kids to get one? Absolutely. They’ll need credit to get a mortgage, a car loan, or even an apartment. I recommend opening a bank account for your kids when they’re in elementary school, and making decisions about when they get their first card based on the needs and personality of each child.

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Opening up the conversation about money and fiancés at an early age is a good way to make sure your kids will do the best they can with their finances throughout their lives. When I was younger I was a worry-wart, especially with my (single) mom's bank account. I distinctively remember going to the grocery store, and covering my ears when the cashier would ring up the total. I was completely worried about running out of money, and in turn I didn't learn much about how to manage finances. But I was always taught about what a credit card is, does, and the dangers of using it stupidly. I would never do what one of my friends does- racks up online purchases and meals dining out, and then complains about her bills.

Credit cards must not be viewed as magical cards that buy whatever you want. Young children must realize that they are paid off at the end of every month. It's a concept that must be grasped or they will have a skewed view of the credit card.

Also, teenagers need to realize that they cannot just take whatever credit card offers come their way. They need to select a credit card with good rewards and stick with it. Having too many credit cards can really ruin your credit score if you're not careful.

It is imperative that children learn these things about credit cards. Thank you Elizabeth.